Siemens, one of Germany's biggest companies and a major exporter of
goods from trains to hospital equipment, said it first aimed to
improve the operating margin for its core industrial businesses to
close a gap with rivals before focusing on growth again.
Chief Executive Joe Kaeser, who took over in a boardroom coup a year
ago, is on a mission to simplify the once-sprawling conglomerate,
weeding out or fixing underperforming businesses and allowing the
stronger ones to shine.
Kaeser has already sold a hospital IT unit and Siemens' stake in
home appliances joint venture SBH, and bought oilfield equipment
company Dresser-Rand to help its ailing energy unit catch up on
exploiting the U.S. shale boom.
He said he was now determined to get on top of operational problems
that keep cropping up in Siemens' businesses, most recently in wind
turbines where problems with blades and bearings caused a 223
million-euro ($279 million) charge in the fourth quarter.
"2015 will be the year of operational consolidation. We still have a
few challenges to overcome and to make better on the way we execute
our orders into revenues. We've had a few setbacks," Kaeser told
"We've got a lot on our plate but we know where we're going," he
Chief Financial Officer Ralf Thomas said the Munich-based group
wanted to bring annual one-off charges for such issues, which
amounted to 900 million euros for the year to end-September, down to
an average of 350 million euros.
Siemens is also now aiming for an industrial profit margin of 10 to
11 percent in the current fiscal year, introducing a new measure to
help it benchmark itself better against rivals.
The margin figure, which Kaeser said would be a clear improvement on
last year's, compares with Swiss ABB's 14.3 percent third-quarter
operating margin, and a 16.3 percent industrial margin at arch-rival
Siemens shares were up 0.5 percent at 89.53 euros by 1100 GMT (7
a.m. EST), after the company said it would raise its dividend by 10
percent to 3.30 euros per share.
"The outlook looks muted and our estimates might prove to be too
optimistic. However, we expect that also in FY 2014/15 portfolio
adjustments remain the key share price driver," DZ Bank analyst
Jasko Terzic said in a note.
Siemens also announced on Thursday it has agreed to sell its
hearing-aid unit, Siemens Audiology Solutions, to private equity
firm EQT and Germany's Struengmann family for 2.15 billion euros.
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In addition it said the legal separation of its healthcare unit in
countries including Germany, a possible precursor to an eventual
full or part disposal that could raise the value of the unit and the
rest of the company.
"We can react as the market demands at any time," Kaeser told
Siemens reported a 28 percent rise in its fourth-quarter operating
profit, which it calls 'total sectors profit', to 2.2 billion euros
($2.76 billion), short of the average estimate of 2.25 billion euros
given in a Reuters poll of analysts. Sales were unchanged at 20.6
Fourth-quarter orders rose 2 percent to 20.7 billion euros, beating
expectations, but like-for-like order intake from emerging markets
fell 14 percent from a high base last year.
Profits at the Energy Sector unit tumbled 28 percent in the quarter,
overshadowing strong results from the group's three other divisions:
Healthcare, Industry and Infrastructure and Cities, which helped
group net profits rise 40 percent to 1.5 billion euros.
"Challenges are growing in the power generation business," said Lisa
Davis, the new head of the Energy Sector unit, recently recruited
She said the business for large gas turbines, in decline since 2008
as power generation becomes decentralized and overcapacities rise,
was facing high price and margin pressures.
(Editing by Maria Sheahan and Greg Mahlich)
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